How the Future of Binance is Local and Global

Regulatory pressure on Binance reaches a breaking point.

In many crypto circles if you wanted to own crypto and were somewhat new to the space, you either went to Binance or Coinbase. While Coinbase as gone IPO and gained a lot of new customers during the second Bitcoin bull market, Binance is now under regulatory threat in dozens of countries.

So how did this situation come to be? Most recently, Binance faces urgent regulatory woes after Malaysian regulators banned it in the country, giving the exchange two weeks to cease operations. Binance is technically incorporated in the Cayman Islands and has an office in Singapore. But apparently it’s been operating in many countries and jurisdictions without a proper license.

In the Spring of 2021 we got the first sign something was seriously wrong with Binance’s accreditations. In May we found out that Binance is under investigation by the Justice Department and Internal Revenue Service.

Binance is clearly one of the more innovative crypto companies and one of the most bordering on decentralization. However it’s been likely used for money laundering as well. Binance users in Germany, Italy and the Netherlands will, with immediate effect, not be able to open new futures or derivatives products accounts, the exchange said in a statement on its website. In every Bitcoin bull market, there are many “bag holders” if you will.

Crypto is Pivoting to Silicon Valley

With China’s crackdown on Bitcoin mining and crypto services, Binance, the world’s largest crypto exchange appears to be in regulatory disarray. This strengthens the likes of Coinbase, Square, PayPal and others who have become more popular during the bull market. Companies like Binance and Bitmain are less known, but gigantic sprawling companies tethered to the fate of cryptocurrencies.

“Our goal is to help increase the freedom of money, all around the world, without sacrificing security and compliance,” CEO Changpeng Zhao said. But 2021 has basically really impacted the reputation of Binance as a Coinbase competitor even as Coinbase’s IPO has fueled its calculated expansion. At the Last Futurist we have speculated that Facebook was likely to acquire Coinbase one day.

As part of the inquiry, the officials who probe money laundering and tax offenses have sought information from individuals with insight into Binance’s business. The U.S. investigation has led to several other countries shutting down Binance in their regions.

Lack of Consumer Protections a Problem

Binance is now reducing the maximum leverage — or borrowed funds — users can use to trade futures contracts, amid concerns such high-risk bets were leaving clients with hefty losses.

Bitcoin and other cryptocurrencies have surged in popularity among retail investors during the global pandemic, prompting regulators to put trading platforms under increased scrutiny even though most cryptocurrency trading is unregulated. While Bitcoin has gone more mainstream, Binance has not been so fortunate.

So who is really starting to question the legality of Binance’s operations? So far and this may not be totally up to date, the company is under investigation by US regulators, tax and justice authorities. It’s facing bans in the UK, Italy and Ontario – Canada’s most populous province. It’s received warnings from regulators in Japan, Germany and the Cayman Islands, among others.

• UK

• Ontario, Canada

• Germany

• Japan

• Malaysia

In the Spring Germany’s financial regulator BaFin warned that Binance risked being fined for offering its securities-tracking digital tokens without publishing an investor prospectus. This led to a slew of other investigations around the world. It’s not clear how Binance can clear its name and remain compliant in these regions. It’s nearly hard to believe that the biggest crypto trading platform neglected its legal obligations on regulation and compliance, how could this be?

Binance Regulatory Headwinds Benefits Coinbase, Square, PayPal, Robinhood and Others

Banking and FinTech are very regulated industries but cryptocurrencies have escaped some of that pressure. Now with Bitcoin going more mainstream, that’s all changing.  Binance is under pressure from financial authorities across the world, including Britain, Germany, Hong Kong and Italy.

Weirdly this favors Coinbase in becoming the largest platform. The chief concerns appear to revolve around consumer protection and the standard of anti-money laundering checks at crypto exchanges, where investigations have ratcheted up pressure on Binance, one of the world’s largest crypto exchanges by trading volumes.

A Binance spokesperson said the company took their legal obligations “very seriously and engage with regulators and law enforcement in a collaborative fashion.” In late June, 2021 the UK’s Financial Conduct Authority (FCA) banned Binance Markets Limited—a British entity owned by the Cayman Islands-based Binance—from carrying out any “regulated activities” in the country. It is believed other countries will follow.

With the rise of Bitcoin and amid Chinese bans on Bitcoin mining, Silicon Valley has more control over the future of cryptocurrencies than ever. This favors the Billionaires of California and Coinbase having more control as Bitcoin becomes a more traded asset. This opens the door for the Jack Dorseys and Cathie Woods of the world to have more sway and Binance was likely a dark horse that was unwelcome in that picture.

When your CFO abruptly leaves the company and the CEO says he is open to being replaced, it’s not a good sign for your company. Wei Zhou, the chief finance officer at Binance, has left the company, as of June, 2021. Binance CEO Changpeng “CZ” Zhao says Bitcoin cannot be regulated by governments but is now apparently open to resigning. Binance must be in a very serious position for this to occur.

Binance Needs An Actual HQ

Binance aims to set up a number of regional headquarters around the world and will seek licenses wherever they are available, Zhao said. In the Californiacation of Bitcoin and the pumping by Billionaires, it’s not clear what the fate of more decentralized companies like Binance can be.

Binance is still the world’s largest digital currency exchange by trading volume, as Coinbase trading fees are relatively high and its shiny app is more attuned to people who have not been in crypto before. Regulators in Japan, Canada and Italy have also clamped down on the firm, warning it is not authorized to operate in the countries. How will Binance rebound as Bitcoin’s volatility and meme traders continue to enjoy the bubble market the Central bank of the U.S. created.

Jack Dorsey is pushing crypto in his companies of Square (and Tidal) and Twitter, while Coinbase is thriving with more volume during the pandemic, and even Robinhood has been a huge beneficiary of dogecoin mania inspired by Elon Musk. Binance may as well be an underground firm at this point with rumors of money laundering and the lack of a defined global headquarters that’s trustworthy.